Wednesday, December 3, 2014

Cooperation in Water Resources in SAARC: Potential and Challenges

As water from Nepal’s all rivers flow into Ganga in India and eventually into Bay of Bengal via Bangladesh, where she is known as Padma, Nepal is directly connected with these two SAARC member countries from the perspective of water resources. However, electricity generated from rivers of Nepal can be traded with remaining SAARC member countries, including with China.

Nepal’s contribution in River Ganga/Padma
Nepal’s rivers are important both to India and Bangladesh, which contribute 40% of annual average flow and 70% in dry season. Maybe for this very reason Nepal is renown as “rich” in water. However, only 25% of the population has access to tapped-water, who receive water for couple of hours once every 10-12 days. For the remaining people, Nepal being called rich in water is an insult. India and Bangladesh also face similar problem.
Actually Nepal isn’t rich in water; rather the countries on Ganga basin are mired in the vicious cycle of flood and drought. The rivers are flooded every monsoon (about 4 months) which causes loss of life, infrastructure and property costing hundreds of billion and hundreds of billion will be required for rehabilitation and resettlement. The region suffers drought like situation rest of the year.
During monsoon itself, there are areas where water scarcity rages due to monsoon failure. Similarly, people also suffer from, heavy monsoon or untimely (early/delayed) monsoon. In this backdrop, it is but natural for the people of this region to be “starved” of clean/potable water.
Bangladesh faces additional problems with receding flow in Padma: it has become difficult for inland navigation due to collection of sand and agricultural land is becoming uncultivable by invasion of saline water from Bay of Bengal.
Moreover, all SAARC member countries are “in the same boat” with respect to severe shortage of hydropower. Both India and Bangladesh are eager to import from Nepal, but Nepal herself is suffering from electricity crisis and hoping to import from India.

Reservoir to Mitigate
Various water related problems of Nepal, Bangladesh and India can be solved by building multipurpose projects like Koshi High Dam (3,300 MW), Sun Koshi High Dam (1,300 MW), Budhi Gandaki (1,200 MW), Upper Karnali (4,180 MW), Chisapani Karnali (10,800 MW) in Nepal and Pancheshwar (6,480 MW) at Nepal India border, etc. which will also generate high quality peaking power.

Flood Control
Flood control in downstream reaches in Nepal, India and Bangladesh is one of the most important positive externality of building reservoir projects in Nepal, due to which these countries will neither suffer damage of life, property and infrastructure and nor will have to spend on resettlement and rehabilitation.

Lean Season Augmented Flow
Another positive externality that accrues from reservoir project is lean season augmented flow; water stored in such reservoirs would be released during dry season for electricity generation, which will augment the flow in the respective rivers during dry season. Run of river (RoR) projects generate full capacity electricity during wet season and less than one-third of the installed capacity in the dry season, such that substantial part of the energy generated gets spilled for lack of commensurate demand during wet season while lower generation in dry season results in energy crisis. Whereas reservoir projects generate peaking power which is an important positive externality, requiring to spill no energy. Besides, peaking power fetches substantially higher tariff compared to from RoR, leading to energy security.
Countries on Ganga River basin are suffering from lack of clean/potable water for drinking and sanitation, resulting in sickness and absenteeism from work, entailing costly medical treatment; even untimely deaths. Ground water is used in most of the plains of these countries where high arsenic content is playing havoc with health. According to medical practitioners, country’s cost of medical treatment can be halved by the use of clean/potable water. Reservoirs will provide adequate amount of clean/potable water, helping attain water security. Besides, according to a study based on satellite data and published online in Nature today “the heartland of last century's Green Revolution lost 109 cubic kilometres of water from its Indus River plain aquifer between August 2002 and October 2008.” Constant flow of about same quantum of water in the rivers will improve watershed of the river basin and underground aquifers will also get recharged.
This region is dependent on monsoon rain for cultivation and, therefore, only one crop gets planted every year mostly (in some places groundwater is pumped up to cultivate in dry season, which is financially and economically costly). Lean season augmented flow will provide irrigation facility and multiple cropping (3 to 4 crops/year) will become possible, leading to food security and also help fishery and animal husbandry, thereby making nutritious food available cost effectively.
Inland navigation is almost nonexistent in Nepal due to flood and drought syndrome and lack of large water bodies; except in the reservoir of Kali Gandaki A project. But inland navigation becomes possible in both the reservoir and also in the downstream reaches including in India and Bangladesh such that steamers from Nepal can travel all the way through to Bay of Bengal and even into high seas – another positive externality. What is important is the fact that cost of fuel of water transportation is cheaper by more than 80% compared to surface transportation.

International Trade of Power
Hydropower is both clean and renewable and it can also be produced and switched off at a moment’s notice, which isn’t possible in the case of energy generated from other sources including nuclear. Therefore, peaking power is valuable even from the perspective of energy mix.
In this context, Nepal can export hydropower to meet peak load in the neighbouring countries and import energy generated from other sources when cheap energy is available. From this perspective, it is an achievement that SAARC Framework Agreement on Energy Cooperation was signed during 18th SAARC Summit on 27th November 2014 in Kathmandu. In the absence of such an agreement monopsony situation obtained in the power market between Nepal and India, latter being the single importer of electricity and former “captive” supplier. This agreement will free Nepal from the compulsion of exporting electricity solely to India. However, the age old cliché of “the proof of the pudding is in the eating” can go through litmus test if India would actually allow Nepal to export electricity to, for example, Bangladesh, through Indian transmission network.

Potential and Challenge
As discussed above, there are potentials aplenty for these three countries to benefit from multidimensional uses of water. But extraordinary challenges exist and the countries need to face these concertedly.
Koshi and Gandaki treaties were signed and Koshi and Gandai projects were built in Bhimnagar and Bhaisalotan respectively in 1950s. During that time moon was promised to people of Nepal but nothing materialized in last 5 decades. Nepal suffers from inundation and involuntary displacement (the negative externalities) due to these projects, while India is reaping benefit from flood control and of irrigation (the positive externalities) solely. It will not be possible to replicate this modality anymore.
Proper economic assessment of benefits from flood control and multidimensional uses of lean season augmented flow like water security, food security, navigation, watershed improvement and cost of negative externalities of submergence and involuntary displacement will have to be made and the country suffering from negative externalities will have to be recompensed by the countries benefitting from positive externalities. These countries can emulate Columbia Treaty between Canada and US or Treaty on Lesotho Highlands Waters Project between Lesotho and South Africa.

Sapta Koshi High Dam
For example if high dam is built on Koshi river, 13 billion cubic meter water can be stored but will inundate 196 square kilometer of Nepal’s cultivable land and forest, thereby submerging one airport, some road, 19 bridges and also displacement of about 100,000 people. This project can generate 3,300 MW power and will control flood in both India and Bangladesh and will provide water to irrigate 1 million hectares of land there.
It is estimated to cost $2 billion and will require $500 million equity, which can be contributed by these three countries and $1.5 billion debt. The electricity generated can be traded in SAARC region at international commercial rate and the equity holders can share dividend in proportion to their equity investment.
By using the formula enshrined in Lesotho treaty, India and Bangladesh will have to recompense GoN by $300 million/year for the positive externalities that will accrue to these countries and negative externalities that Nepal will suffer. However, the rate and amount of recompense can be fixed by negotiation and there is no need to exactly copy the practices of other countries. Moreover, as Nepal would be helping generate/provide lean season augmented flow to both India and Bangladesh, it will be a pre-condition for building these projects to afford inland navigation to landlocked Nepal with access to open sea.

Guarantee of Cooperation
Currently, India is showing inclination to build projects in Nepal in the lines of Koshi and Gandaki projects, neither providing recompense for negative externalities to Nepal, nor sharing positive externalities with Nepal, but giving some “free” electricity. However, this modus operandi isn’t acceptable to Nepali people anymore. Recompense has to be provided for negative externalities and sharing positive externalities based on internationally accepted principles is sine qua non.